The Treasury Laws Amendment (Gift Cards) Bill 2018 has been passed into law on 18 October 2018 and received Royal Assent on 25 October 2018. This legislation sets a minimum three year validity period and other requirements on gift cards sold nationally from 1 November 2019. This follows the New South Wales Government having introduced their own gift card legislation for cards sold in their state, and moves by the South Australia Government to do the same.

Australian’s purchase around 34 million gift cards each year, with a market value estimated at $2.5 billion. About $70 million of this is wasted each year because gift cards aren’t redeemed before the expiry date. It will be interesting to see if setting a minimum validity period significantly reduces this figure – in the United States, who banned expiry dates on gift cards completely in 2009, saw the unused amount of gift cards drop by nearly 90% over 7 years.

So what are the 3 new rules for gift cards?
All gift cards sold in Australia from 1 November 2019 must meet the following requirements:

• 1. They must be valid for a minimum of 3 years from the date of purchase
  2. The gift card itself must prominently display either the actual expiry date or the the date the card was purchased and a statement about the length of validity; if it doesn’t expire it should state words to that effect instead
  3. No ‘post supply’ fees can be charged for the use of the card. These are things like an administration fee for paying with a gift card, activation fees or balance enquiry fees, that essentially reduce the value of the gift card. Fees that would be charged regardless of payment method, for example a booking fee or a fee to reissue a lost and damaged card, are not considered ‘post supply’ fees.

What if your business operates in New South Wales?
New rules around gift cards are already in place in NSW. The NSW Fair Trading Act 1987 has been amended to require most gift cards sold from 31 March 2018 onward to have a three year validity period. The NSW amendments also ban post-supply fees – see https://www.fairtrading.nsw.gov.au/buying-products-and-services/ways-to-pay/gift-cards-and-vouchers for specific information.

To keep gift card validity consistent across all their stores, some national businesses are already issuing gift cards valid for 3 years or have simply decided to remove expiry dates altogether.

What happens if you issue non-complying gift cards after 1 November 2019?
If a gift card is issued that doesn’t meet all three rules listed above, then the Australian Competition and Consumer Commission (ACCC) has the power to apply penalties of up to $30,000 for a body corporate or up to $6,000 for persons other than a body corporate. The ACCC can also issue infringement notices which are worth 55 units (currently $11,500) for a body corporate or 11 units (currently $2,420) for persons other than a body corporate.

So it is important that businesses take the lead up time until the new rules come into effect on 1 November 2019 to make sure that:

• 1. Any existing gift card stock which would not be compliant under the new laws is run out
  2. Further gift cards produced prominently display the expiry terms
  3. Internal processes and systems are updated to ensure gift cards are recognised for the minimum 3 year validity period and that any current post-supply fees that are possibly being charged are removed.

What happens to gift cards when a business goes broke or is sold?
If a customer still has a balance on an unexpired gift card when a business goes broke, they become an ‘unsecured creditor‘ of the business.

New owners of a business must honour any balance on an unexpired gift card where:

• 1. They purchased the business as a ‘going concern’ (ie they bought all the assets and liabilities of the business from the previous owner)
  2. The business was previously owned by a company instead of an individual and they (the new owner) purchased the shares in the company.

If you have any questions about the changing requirements for gift cards and how they may affect you we would be happy to discuss – call 03 5339 3200 or contact us here.

Thanks for reading.

By Genna Kidd

The information contained on this website has been provided as general advice only.  The contents have been prepared without taking account of your personal objectives, financial situation or needs.  You should, before you make any decision regarding any information, strategies or products mentioned on this website, consult your own financial advisor to consider whether that is appropriate having regard to your own objectives, financial situation and needs.